Which of the Following Is NOT a Correct Statement Regarding

question 53

Multiple Choice

Which of the following is NOT a correct statement regarding a stock split?

• A)There is no effect on retained earnings account
• B)Investors face no tax implications
• C)The average share price will be reduced to reflect the split
• D)There will be no change in the number of shares outstanding

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Definitions:

Allocative Efficiency

A state of the market where resources are allocated in a way that maximizes the net benefit to society, ensuring that every good or service is produced up to the point where the last unit provides a benefit equal to its cost of production.

Productive Efficiency

A situation where the economy or a production process is unable to produce more of one good without reducing the production of another good, using available resources in the best way.

Normal Goods

Goods for which demand increases as consumer income rises, and decreases as consumer income falls, reflecting a direct relationship between income and demand.

Competitive Market

A market structure characterized by a large number of buyers and sellers, homogenous products, and no single buyer or seller can influence the market price.